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deposit) they could offer, but also by the fact that their assets
re effectively confined to residential owner-occupier mortgages. Since then the cartel has collapsed and building societies now offer a wide range of different deposit and money transmission products in direct competition with the retail banks. With the passage of the 1986 Building Societies Act they have been permitted to borrow in the brokered wholesale markets and to issue CDs. Up to 40% of the funds for major building
societies can now come from wholesale sources.
8 On the assets side, they are now permitted to make unsecured personal loans (up to 7.5% of total lending) and carry on a wider range of lending (eg, to Housing Associations) for home ownership or renting (up to 10%).
9 They are also permitted to offer travellers' cheque and foreign exchange and chequeing account facilities. For the ordinary retail customer who is looking for deposit, money transmission, personal loan and bureau de change facilities, there is now little or no distinction between the major retail banks and building societies. Building societies now account for 59% of all bank and building society lending to the personal sector and for 2% excluding lending for house purchase.
Foreign bank penetration of the UK domestic market
10 While no foreign bank other than National Australia Bank (with its interests in the highly regional Northern, Yorkshire and Clydesdale banks) has opened a significant branch network, their penetration of the UK domestic corporate loan market has been considerable. In 1971, the retail banks accounted for approximately 75% of sterling lending to UK residents. By 1991, the figure had dropped to 63%. In terms of total domestic lending (sterling and currency) by banks, the retail banks now account for only 55% compared with 65% in 1971. Lending by foreign banks to the corporate sector has grown from about 25% in 1971 to 35% in 1991. The growth in the swaps market has rendered the distinction between lending in sterling and in foreign currency much less significant for corporate borrowers.
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